Q: Does this product include the insulation collar?
A: No, the Velux BFX 1000 kit includes only the underfelt collar and drainage gutter.
You can, however, purchase the BFX together with the insulation collar in one kit:
Q: Is this a required product or can I get away with not having it?
A: The underfelt collar or the insulation collar (see question above) are not fundamentally necessary for the installation of your roof window -- in other words, you can fit your window without this product. However, Velux highly recommend the use of these installation accessories as they provide a higher spec, more weathertight, energy efficient seal, and you are less likely to have problems with your roof window in the long run if you use them.